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The Changing Face of Fairtrade
This blog entry was written by Randy Hooper for and taken from the Fair Trade Vancouver blog. Fair Trade Vancouver works to advance equality, social justice and environmental sustainability by promoting a system that respects producers and artisans around the world. For more information about Fair Trade Vancouver check out their website.
Fair Trade is a social movement – there are hundreds of non-profit organizations like Fair Trade Vancouver actively promoting a better world, not only in developed countries, but also in Latin America, Africa, and Asia. Until recently we had this kind of awkward arrangement where organizations sitting in ivory towers in Europe completely controlled the form of payments and amounts that farmers, from far away, would receive. These organizations were also the ones responsible for sending foreign certifiers and auditors to make sure all was well. However, the movement is changing very quickly, and for some, it may be confusing.
The development of the certified Fair Trade movement parallels the growth of Certified Organic. In the certified organic system, regional certifiers began by establishing their own standards. One by one, countries around the world established national standards (COR in Canada, NOP in the U.S. etc.), which, through equivalency agreements, have become a global standard. Audits are undertaken by independent certifiers representing over 280 certification bodies around the world. I expect that the Fair Trade movement will morph in a similar direction over the next few years, and consumers will get used to seeing 10 different Fair Trade certification marks in one store, just as they do with organic.
At least three organic certification bodies have now developed Fair Trade certification systems, giving growers the option to save some money and have the same body certify to both standards.
When it comes to auditing importers and exporters, Fair Trade is really, more about money than anything else. This is really a function that an independent accountant should be doing, and I expect we’ll see a movement towards accrediting independent auditors for the Fair Trade world who have a bookkeeping background.
My experience is in the fruit and vegetable industry, where price volatility is more dramatic than any other – it’s a supply and demand market that changes daily. No one is out there coordinating the planting schedules of hundreds of millions of small farms—or the weather. Establishing a “fair” price is very difficult. In the big world, when produce is bought and sold, farmers rarely know what they will get for their fruit or vegetables until after it has been sold. They don’t produce an invoice, and when their produce is sold, they receive a liquidation report that shows them their net return after all other costs are deducted—transportation, brokers fees, packaging, sea containers, customs etc. If the fruit or vegetables arrive during a glut market, or the importer doesn’t pull off a good sales effort before things start to rot, it can turn into a very small and unprofitable return for the grower, sometimes it’s zero or even worse. Only about 1% of those millions of daily transactions between growers and importers are Fair Trade.
The only difference with Fair Trade is that there is a contract between the buyer and seller that guarantees the farmer receives at least a minimum guaranteed (MG) price, which is based on their production and transportation costs, and a small profit—no matter what happens. This puts more onus on the shoulders of importers and marketers to buy the right volumes and do a darn good sales job. If the market price is high, then the grower gets more money, but never less than the guaranteed price—that’s the only major difference between the regular way of doing business, and Fair Trade.
The only system in the Fair Trade arena that doesn’t take this approach is FLO, the dominant certifier, which instead tries to establish a MG price that is universal, and not based on regional differences in climate, production techniques, varying transportation cost, or on ever-changing market conditions. The pricing for the hundreds of commodities they certify for is often years out of date.
FLO was the original certifier, with offices in many countries, (like Fair Trade Canada or Max Havelaar in Europe) who charges fees to importers; these fees go marketing Fair Trade in each importing country. Recently, Fair Trade USA has left the FLO umbrella and will start doing its own certifications. This wasn’t unexpected—a year ago, Fair Trade USA went ahead and certified Dole as a Fair Trade entity, and opened the door for larger corporations, agri-business, plantation growers etc. to become Fair Trade licensees. This has apparently become quite a controversial move on their part. But this social movement is always changing. Next year, many Fair Trade products will bear the Fair Trade USA logo, not the FLO logo, while Fair Trade Canada will take over FLO audits in the U.S.
At the same time, all other bodies that base Fair Trade certification on individual contracts with growers—which are based on the particular grower’s own needs and costs—have grown quickly. Some of these are regional—they aren’t interested in certifying all over the world, but only in the countries or regions where they already have a presence as organic certifiers. These include Control Union in Peru with their new “Fair Choice” logo, BCS who certify organics in several South American countries and now have a “Fair Planet” system, and Ecocert with their own Fair Trade logo. IMO, the other large European based certifier has reacted quickly to the huge demand for Fair Trade products and has developed a very strong program with their Fair for Life logo. The World Fair Trade Organization has developed its “Sustainable Fair Trade” system. The other major player is Rainforest Alliance, certifying specifically coffee and tea.
Personally, I would like to see many of these certifiers not only audit the producers, but do an in-depth analysis of the importer as well, not just establishing them as a licensee, but actually certifying them as Fair Trade entities—and looking at how the companies operate as a whole, and not just its Fair Trade transactions.
The Fair Trade movement, although a tiny (but growing) segment of the consumer world, has had a much greater impact in Latin America and other exporter nations, not because of the direct impact, which in the grand scheme is barely noticeable, but because those societies as a whole have taken the promotion and education of Fair Trade on as a major social movement.